Bayer (XETR:BAYN), one of the world’s largest pharmaceutical and agrochemical companies, has faced severe legal battles in recent years. The main focus was on lawsuits related to the acquisition of Monsanto and the controversial herbicide glyphosate, known by its brand name Roundup.
Legal disputes, especially those that gain widespread attention, always have an impact on companies’ share prices. In the case of Bayer, lawsuits related to various allegations about the use of potentially dangerous chemicals have consistently raised concern among investors. This happened on January 26, 2024, when a jury in Philadelphia, USA, ruled that the company must pay $2.25 billion in compensation to a Pennsylvania resident who, according to the investigation and medical examinations, was diagnosed with cancer. Reports indicated that the use of Roundup and its active ingredient, glyphosate, was cited as the cause. Following this verdict, Bayer’s shares plummeted by over 5%. It was just the beginning, over the past month, the stock lost almost three times as much.
Since acquiring Monsanto in 2018, Bayer inherited a slew of lawsuits related to glyphosate, with plaintiffs alleging that the substance was capable of causing cancer. The first court ruling in 2018, which ordered Bayer to pay millions in compensation, spurred numerous new lawsuits and a prolonged decline in Bayer’s share price. If there is a list of market movers, Bayer has been on the losing end.
Bayer’s lawyers have been actively implementing measures to mitigate damages from litigation. In addition to the courtroom battles, the company is actively negotiating out-of-court settlements, with reports suggesting significant financial resources allocated for this purpose.
Responding promptly to the challenges, Bayer has devised a claim settlement plan and set aside funds for financial coverage, actions aimed at restoring investor confidence and stabilizing the stock price to some extent. Moreover, Bayer has officially announced its intention to reduce the use of glyphosate and invest in safer alternatives while enhancing transparency in its production processes. These efforts contribute somewhat to rebuilding the company’s reputation post-litigation.
Legal cases involving substances used in pharmaceuticals and cosmetics manufacturing significantly impact Bayer’s stock price. The dependence of the stock price on the lawsuit outcomes increases volatility and adds uncertainty to investment forecasts. However, effectively managing crises and aligning with evolving market demands and consumer preferences could facilitate long-term recovery and growth in Bayer’s share price.
Despite these efforts, investor sentiment remains pessimistic, with the current support and resistance levels presenting challenges. The support level, currently at $30.5, is potentially susceptible to selling pressure, while the resistance level, set at $25, is likely to be breached swiftly. Mass lawsuits have a compounding effect, severely damaging reputation and heightening investor apprehension. This sentiment was reflected in the earnings report for the last quarter of 2023, where Bayer stunned observers with an almost two-fold drop in profits.
